Mullen Group Ltd. reports first quarter financial results
OKOTOKS, AB, April 29 /PRNewswire-FirstCall/ - (TSX-MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") reported its financial and operating results for the period ended March 31, 2010 with comparisons to the same period last year. On May 1, 2009, the holders of trust units of Mullen Group Income Fund (the "Fund") and the holders of Class B limited partnership units of Mullen Co. Limited Partnership approved a Plan of Arrangement that resulted in the conversion of the Fund from an open-ended income trust to a corporation called "Mullen Group Ltd." Mullen Group as the successor in interest to the Fund was accounted for as a continuity of interests whereby the consolidated financial statements for the three month period ended March 31, 2010 and comparables for the three month period ended March 31, 2009 reflect the financial position, results of operations and cash flows as if Mullen Group had always carried on the business formerly carried on by the Fund. Throughout this news release, references made to cash distributions declared reflect the business of the Fund that occurred prior to conversion from an open-ended income trust to a corporation.
For the three month period ended March 31, 2010, Mullen Group generated consolidated revenue of $259.9 million and operating income of $57.2 million. Mullen Group generated $24.4 million of funds from operations which was supplemented by $2.8 million of proceeds on sale of investments. These funds were mainly used to finance non-cash working capital items of $32.0 million, pay dividends totaling $10.1 million, acquire net property, plant and equipment in the amount of $4.1 million, purchase investments of $3.2 million and finance other assets of $1.8 million.
Mullen Group's revenue of $259.9 million for the three month period ended March 31, 2010, was a decrease of $52.1 million or 16.7 percent from the $312.0 million generated for the same period last year. This decrease in consolidated revenue can be attributed to three main factors. The most significant factor related to lower demand levels associated with capital investment in major projects, including the development of Canada's oil sands deposits in northern Alberta, due to the time lag associated with the capital investment cycle, a direct result of the 2008-2009 global financial crisis. Second, the changing profile of wells drilled in the western Canadian sedimentary basin ("WCSB") has resulted in rig moves of much shorter distances thereby lowering demand for these services. Despite industry statistics indicating a year over year increase in the number of wells drilled in the WCSB, a significant portion of this increase occurred in Saskatchewan and Manitoba, areas where Mullen Group does not have a strong rig relocation service presence. Third, revenues also declined due to a lack of large diameter pipeline construction activity in 2010 compared to a major project being completed in the first quarter of 2009.
"The operating environment in the first quarter of 2010 although difficult, showed positive signs that the economy has stabilized which is supported by the announcement of several major capital projects. As the quarter progressed activity levels across most of our business units began to improve as capital began to be deployed. It is worth noting that March 2010 was the first month for over a year where on a consolidated basis, our business units experienced an increase in operating income on a year over year comparison basis. Despite a 16.7 percent year over year decrease in revenue, it was reassuring to see our business units maintain an overall operating margin above 20.0 percent which displays the strength and flexibility of our business model to adapt to market fluctuations which can cause periods of lower customer demand. Our business units also benefited in 2010 from their efforts to reduce and control costs through control measures which they implemented in 2009," stated Mr. Stephen Lockwood, President and Co-Chief Executive Officer.
Mullen Group generated operating income for the quarter of $57.2 million, a decrease of $16.4 million or 22.3 percent over the same period last year. The decrease in operating income was mainly attributable to the year over year decrease in consolidated revenues. Operating income decreased in both the Oilfield Services segment and the Trucking/Logistics segment by virtue of the impact of a year over year reduction in capital spending on projects in Canada's oil sands deposits. The Oilfield Services segment also saw a reduction in operating income by virtue of a lack of large diameter pipeline construction activity on a year over year basis.
For the quarter ended March 31, 2010, Mullen Group generated funds from operations of $24.4 million, a decrease of $6.7 million or 21.5 percent over the $31.1 million generated for the same period last year. This decrease was mainly due to the $16.4 million reduction in operating income in 2010 compared to 2009. Funds from operations also decreased due to an additional $2.2 million of interest and accretion expense resulting mainly from the issuance of the convertible debentures on May 1, 2009. These decreases were offset by a reduction of $11.6 million in the provision for current income taxes which was mainly due to additional tax recorded in 2009 by virtue of the Fund's internal reorganization in anticipation of converting from an open-ended income trust to a corporation.
For the quarter ended March 31, 2010, Mullen Group generated net income of $23.7 million ($0.29 per share), a decrease of $7.3 million, or 23.5 percent from the $31.0 million ($0.38 per share) generated for the same period last year. The $7.3 million decrease in net income was mainly attributable to the $16.4 million decrease in operating income and a $5.2 million increase in the provision for income taxes which were offset by a $16.4 million variance in the unrealized foreign exchange gain. To a lesser extent, net income was negatively impacted by a $2.2 million increase in interest expense by virtue of the Corporation's convertible unsecured subordinated debentures. Mullen Group's net income and earnings per share, adjusted, reflect the impact on net income and earnings per share as though Mullen Group had been a corporation since January 1, 2009 as well as before the impact of the unrealized foreign exchange gains or losses in 2010 and 2009. These adjustments reflect earnings from an operating perspective. Adjusted net income is $18.8 million ($0.23 per share) compared to $31.2 million ($0.39 per share) in 2009.
A summary of Mullen Group's results for the quarter ended March 31, 2010, along with revenues and operating results by segment are as follows:
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SUMMARY Three Months Ended
March 31
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2010 2009 Change
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(Unaudited)
($ millions, except per share and unit
amounts) $ $ %
Revenue 259.9 312.0 (16.7)
Operating income(1) 57.2 73.6 (22.3)
Net income 23.7 31.0 (23.5)
Net income - adjusted(2) 18.8 31.2 (39.7)
Earnings per share(3) $0.29 $0.38 (23.7)
Earnings per share - adjusted(2) $0.23 $0.39 (41.0)
Funds from operations(4) 24.4 31.1 (21.5)
Funds from operations per share(5) $0.30 $0.39 (23.1)
Cash dividends declared per common
share $0.125 - 100.0
Cash distributions declared per unit - $0.225 (100.0)
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Notes:
(1) Operating income is defined as net income before interest and
accretion, income taxes, depreciation on property, plant and
equipment, amortization on intangible assets, earnings from
equity investment, stock-based compensation, unrealized foreign
exchange gains or losses, changes in fair value of investments,
and gains or losses on sale of property, plant and equipment.
(2) Net income and earnings per share have been adjusted to reflect
earnings before the impact of unrealized foreign exchange gains
and losses. Net income and earnings per share have also been
adjusted for the tax impact as though Mullen Group had been a
corporation since January 1, 2009.
(3) Earnings per share is based on the weighted average number of
shares outstanding for the period.
(4) Funds from operations is defined as cash flow from operating
activities before changes in non-cash working capital items.
(5) Funds from operations per share is calculated by dividing funds
from operations by the weighted average number of shares
outstanding for the period.
Operating income, funds from operations and funds from operations per
share are not recognized measures under Canadian generally accepted
accounting principles ("GAAP"). Management believes these measures
are useful supplemental measures. Operating income provides an
indication of the results generated by the Corporation's principal
business activities prior to financing activities, amortization of
assets, or taxation in various jurisdictions. Funds from operations
indicate the Corporation's ability to generate funds from its
operations without the seasonality effect on its working capital.
References to operating income, funds from operations and funds from
operations per share are not measures recognized by GAAP and do not
have standardized meanings prescribed by GAAP. Investors should be
cautioned that these indicators should not replace net income as an
indicator of GAAP performance.
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SEGMENTED RESULTS Three Months Ended
March 31
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2010 2009 Change
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(Unaudited)
($ millions) $ $ %
Revenues
Oilfield Services 177.2 209.1 (15.3)
Trucking\Logistics 83.2 104.6 (20.5)
Corporate 0.2 0.5 -
Intersegment eliminations
Oilfield Services (0.3) (1.7) -
Trucking\Logistics (0.4) (0.5) -
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Totals 259.9 312.0 (16.7)
Operating income
Oilfield Services 46.0 57.8 (20.4)
Trucking\Logistics 13.1 16.9 (22.5)
Corporate (1.9) (1.1) -
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Totals 57.2 73.6 (22.3)
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This press release may contain forward-looking statements that are subject to risk factors associated with the oil and natural gas business and the overall economy. Mullen Group believes that the expectations reflected in this press release are reasonable, but results may be affected by a variety of variables. Mullen Group relies on litigation protection for "forward-looking" statements.
Mullen Group is a company that owns a network of independently operated businesses. Today the Mullen Group is recognized as the largest provider of specialized transportation and related services to the oil and natural gas industry in western Canada and as one of the leading suppliers of trucking and logistics services in Canada - two sectors of the economy in which Mullen Group has strong business relationships and industry leadership. Mullen Group provides management and financial expertise, technology and systems support to its independent businesses.
Mullen Group is a publicly traded corporation listed on the Toronto Stock Exchange under the symbol "MTL". Additional information is available on our website at www.mullen-group.com.
SOURCE Mullen Group Ltd.
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